Legal & General Group (LON:LGEN) is preparing to bid for a £10 billion tranche of Prudential’s (LON:PRU) fixed income business, the Sunday Times revealed. This move is expected to take place within a few weeks.
Legal & General’s share price lost ground on Friday, falling 1.18 per cent to close at 269.00 pence. This fall was consistent with the sell-off in the wider London market, where the FTSE 100 benchmark index fell 1.08 per cent to 7,309.96 points. Meanwhile, Prudential’s share price underperformed the Footsie, closing 2.38 percent lower at 1,782.50 pence.
Insiders told the Sunday Times that L&G had internally earmarked funds to finance a deal for a £10 billion cut in Pru’s fixed income business. The move is in line with the blue-chip insurer’s efforts to expand its annuity business by taking business from competitors who are withdrawing. The strategy of Nigel Wilson, L&G’s CEO, has focused on buying up mass pensions or pools of pension funds that have been spun off from blue chip companies that are struggling to make up the shortfalls in their pension schemes.
However, the company could face competition for Prudential’s pension book, with pension buying company Rothesay Life and pension provider Pension Insurance Corporation also reportedly interested in a takeover.
Meanwhile, Pru is expected to sell off the pensions after signaling that it would stop selling them due to concerns about selling practices across the industry by the city’s regulator. It is believed that the Group’s Chief Executive Officer, Mike Wells, has sought advisors to help manage the sale.
The sale would also take place against the background of a restructuring at Prudential, as the FTSE 100 group last week announced plans to merge its two major UK companies into a single entity. The news has fuelled speculation that this move could lead to the break-up of the company.
At 07:56 BST on Monday 14 August, Legal & General Group Plc’s share price was 267.75 pence.